A Good Employee Turnover Rate

Companies in frontline industries suffer from high employee turnover rates.

Good employee turnover is often an elusive goal for frontline businesses. According to data from the Bureau of Labor Statistics released in 2017, certain industries experience much more churn than others.

  • Transportation, warehousing, and utilities: 41.0%
  • Manufacturing: 30.4%
  • Accommodation and food services: 72.5%
  • Retail: 53.0%
  • Construction: 60.1%

Industry-specific reports reveal even higher turnover rates. For example, the American Trucking Association found that annual churn in the 3PL industry was nearly 99% as early as 2014.

“In today’s modern War for Talent, the number of available jobs outnumber the people searching for work and, because of this, companies must to do everything in their power to attract, engage, and retain top talent.” — Salary.com CEO Kent Plunkett

Several recent studies suggest that employee turnover is becoming an increasingly insurmountable obstacle for frontline businesses. Due to a shortage of hourly employees, frontline workers are experiencing wage hikes and more demand for their skills. In fact, a Compdata report indicates that employee turnover is at an all-time high in the United States.

What is a “good” employee turnover rate?

The five industries previously mentioned—3PL, manufacturing, food services, retail, and construction—are generally considered to be characteristically “high-churn.” However, is there a healthy, ideal, or “good” employee turnover rate that management should target?

In answering this question, Gallup turned to legendary General Electric CEO Jack Welch, who aimed to replace the bottom 10% of his company’s workforce every year. In other words, a company should not experience 0% turnover; if an organization is truly growing and acquiring new talent, disengaged and ineffective workers should predictably leave the company.

When Gallup studies top-tier companies, it typically finds that 10% or less of the workforce is “actively disengaged.” In this way, Jack Welch’s goal is supported by modern-day metrics.

A nominally good employee turnover rate only tells part of the story.

There is an important distinction between how many workers are leaving an organization and how many excellent workers are leaving.

Gallup discovered that the top quartile of any given labor force often generates the majority of the company’s productivity. If a company achieves an employee turnover rate of 10% yet finds that its top performers represent the majority of exits, then its employee turnover rate is extremely unhealthy.

Simply put, good employee turnover is possible.

In spite of rising employee turnover rates, companies can still attain good employee turnover and satisfy top talent.

Listening and utilizing metrics are critically important methods for retaining a talented frontline workforce. In the twenty-first century, businesses that fail to retain talent will be on a constant chase for a shrinking pool of frontline workers.

Qlicket assists companies across the United States with measuring, understanding, and supporting workforces. Learn how Qlicket aids businesses with retaining frontline talent and achieving good employee turnover.